2019 Fall Q2
In part d, When assessing the appropriateness of using the average of IFP in the prior and current year as an estimate of EP, would it be acceptable as an answer to calculate the actual IFPs and EP to see if the formula are accurate?
It looks like you're new here. If you want to get involved, click one of these buttons!
In part d, When assessing the appropriateness of using the average of IFP in the prior and current year as an estimate of EP, would it be acceptable as an answer to calculate the actual IFPs and EP to see if the formula are accurate?
Comments
That's a good idea because it's a more direct (and accurate) way of answering the question but it would take a lot longer than providing the type of answer in the examiners' report.
The "quick" answer, which seems to be the one the graders intended, is noticing that not all policies are annual and that the policies are not written uniformly over the year. You could do that in under a minute versus doing the actual calculation, which might take several minutes and would be more prone to error.
So while you had a good idea, and it would be interesting to do for this particular problem while you're studying, it probably wouldn't be the best strategy on the exam where you might be pressed for time.
You might then ask how you were supposed to know to simply give a written reason versus a calculation. The point-value of the question might be an indicator (it might have been more than 0.5 pts for doing the calculations) as well as the fact they already asked you to do calculations in parts (a), (b), and (c). But in the heat of the exam, you might not notice those things.
Just file this problem away in your mind and if something similar comes up on your own exam, you can recall it use it to make an appropriate decision as to how to proceed.